Operational Due Diligence

Eugene Grin (also Grinsphon) of Laurus Capital Management, LLC

Eugene Grin was originally from Ukraine. He came to the US in 1979 and became a vacuum cleaner salesman. After that he worked as a broker of penny stocks at F.N. Wolf & Company. While employed at Wolf, Grin managed a client named Gilbert Bornstein, a 54-year old unemployed man who invested $32,000 with Grin after being convinced he could safely double his money through penny stocks. Bornstein was soon stuck with $27,000 in losses. Nine years afterwards, a New York state judge determined that Grin owned Bornstein $40,000. Grin has yet to pay that bill, and the judgment remains outstanding. Grin was quoted as saying “He was super wealthy, there was money in the family.”
Eugene Grin is quoted in Feb. 2004 regarding a Laurus investment in Inyx, Inc., a drug delivery company. Earlier they made an investment in Equifin.
“Ongoing investigations by IBARC in New York, Liechtenstein, the British Virgin Islands, Grand Cayman Islands, Isle of Man, United Kingdom, Italy, Panama, and Switzerland into such funds as Laurus Master Fund Ltd., The Keshet Fund L.P., Keshet L.P., Nesher Ltd., Talbiya B. Investments Ltd., Esquire Trade & Finance Inc., Amro International and dozens of others are turning up initial evidence related to about two hundred companies in the United States whose stockholders have lost over $100 billion in value over the past decade through toxic financing schemes arranged by various organized crime syndicates managed out of New York City.”
In September of 2004, Laurus Capital management LLC notified Global Digital that they were in default for non-payment of interest due under its borrowing agreement.

The Grins have built up their Laurus Family of Funds to one of the nation’s largest investors in penny stocks in 2006.

Eugene Grin is quoted in Feb. 2004 regarding a Laurus investment in Inyx, Inc., a drug delivery company. Earlier they made an investment in Equifin.

Many of the lawsuits and negative media articles refer to a financing technique called “death spiral” financing.

Laurus is a financial institution that makes direct, secured investments to small and micro-cap public companies.

The attorneys in the Endovasc case comment on their suit filed against Laurus Funds.
Endovasc Provides Status Report on Its $200 Million Case against Alleged Stock Manipulators
MONTGOMERY, Texas Endovasc Inc. (OTCBB: EVSC), a drug development company that pioneers new cardiovascular and metabolic drug therapies, announced today an update on the Company’s civil lawsuit against J.P. Turner & Co. LLC et al Inc., Number 02-CV-7313, in the United States District Court, Southern District of New York. The complaint is for damages as a result of an alleged fraud and stock manipulation. The Company is seeking monetary damages in excess of $200,000,000.
250 articles were found that mention “Laurus Funds”. Many appear to announce investments and loans made to small cap companies.
In 2003, the Wall Street Journal quotes Laurus as “The $500 million Laurus Funds hedge fund says it has pioneered a new financing model for micro caps where Laurus provides debt to small publicly traded companies that is convertible into equity. “

UTEK corp. agrees to sell 350,000 shares of its common stock to Laurus Capital Management .The net proceedings are approximately $ 3,700,000.

In September of 2004, Laurus Capital management LLC notified Global Digital that they were in default for non-payment of interest due under its borrowing agreement.

Jeremy Charles Weir of Galena Asset Management, Ltd.

Jeremy Weir was originally appointed to the board of Iberian Mineral Corp. (a corporation under the laws of Switzerland) in December 2006. He has since been re-elected in June 2007, June 2008, and June 2009.

A June 2009 article states that Trafigura announced that it had acquired an additional 47,493,000 common shares of Iberian Minerals Corp. “As a result, Trafigura now owns, or exercises control or direction over an aggregate of 154,582,163 common shares of Iberian, which represent approximately 45.93% of the outstanding common shares of Iberian.” Jeremy Weir is listed as a director of Trafigura Beheer B.V.

An August 2008 article about the upswing of the dollar and how it would affect commodity returns, Jeremy Weir – listed as chief executive of Galena Asset Management, an $800 million metals and energy hedge fund – is quoted as saying, “We’ve seen some degree of fund inflows into commodities as a quasi-dollar hedge. I would expect to see outflows because of a stronger dollar.”

A February 2001 article announced that Jeremy Weir and Mark Thompson, both formerly of London-based N.M. Rothschild, joined the London office of Netherlands-based commodities trader Trafigura Beheer.

An April 1997 article states that Jeremy Weir was appointed as a director to N.M. Rothschild & Sons.

Prior to NM Rothschild, Mr. Weir was employed at Pasminco Metals and North.

John Martin Tilney of Armajaro Asset Management, LLP

A March 30, 2009 article states that Armajaro Asset Management LLP is among 13 new hedge fund managers that have now committed themselves to the Hedge Fund Standards Board’s standards. The article quoted HFSB chairman Antonio Borges as saying, “In the current climate it is essential that the hedge fund industry demonstrates to regulators and policymakers that it is adhering to the highest standards by ensuring there are safeguards in place that would make a Madoff-type scandal very unlikely. The HFSB standards provide comfort to investors and we are grateful for the encouragement we have had from the Financial Stability Forum and the Financial Services Authority for the HFSB approach.”

A March 25, 2009 article states, “Armajaro Asset Management, in partnership with Czarnikow, a London-based sugar and bio-ethanol brokerage, trading and consultancy firm, plans to reopen its sugar fund to fresh investment soon.”

A March 2009 article announced that Armajaro Asset Management appointed Michel Danechi as the portfolio manager of the soon-to-be-launched Armajaro Emerging Markets Fund “which will focus on investments in Eastern Europe, the Middle East and Africa”.

An August 12, 2008 article states: “Armajaro Asset Management, the $1.3 billion commodity fund run by former Marc Rich & Co. trader John Tilney, lost 7% in July cutting year-to-date gains to 12.5%.”

A May 2008 article announced that Armajaro was to sponsor an environmental initiative to protect plant life on the Paardeberg Mountain in South Africa’s unique Cape Floristic region. (NOTE: This article was found on the company’s website and was not found using any other sources.)

A February 2008 article announced that Armajaro planned to expand into Brazil with the establishment of a coffee sourcing and trading business.

A February 23, 2007 article announced that cocoa supplier Petra Foods Ltd. and Armajaro Holdings Ltd. formed a joint venture called Petra Armajaro Pte Ltd.

A February 2007 article lists Armajaro Holdings, along with Touradji Capital and Ospraie Management, as “hedge funds that have been involved in the boosting of copper and other metals prices, traders claim”.

A January 2007 article states that John Tilney “claims not to have had a losing year in the commodities market since 1980, a feat which (Neil) Heywood said is a tribute to being able to cherry pick different commodities rather than treating the sector as a whole entity”.

An October 24, 2006 article states that Armajaro Asset Management’s $306 million commodity fund gained 15.1 percent in 2006.

An October 2006 article quoted Neil Heywood, listed as a sales director at Armajaro Asset Management, as saying, “Family offices ask more probing questions of hedge fund managers because it is their money. I don’t see institutional investors asking the same detailed questions.” Mr. Heywood goes on to say that institutions focus too much on investment process and fail to find out enough about the hedge fund’s risk profile and risk control mechanisms.

A June 2006 article about the “alternative Woodstock” held in the Hertfordshire countryside indicates that individuals from Armajaro Asset Management attended and that the company had a rally car, table football and a Scalectrix set.

In an August 2005 article, John Tilney states that the Armajaro Commodities Fund “is a pure commodity fund that trades on a discretionary basis in soft commodities, hard and precious metals and energy”. The fund does not trade in fixed income securities, foreign exchange, or cocoa.

A June 2004 article about the 100 richest men in London lists Richard Gower and Anthony “Chocolate Finger” Ward of Armajaro Holdings as tied for 57th place with Pounds 60m.

A May 2003 article states that Anthony Ward called on the Coffee, Sugar and Cocoa Exchange to scrap its trading limit on cocoa futures. “Ward, referring to the backwardation structure of the CSCE, said the scrapping of the lot limit would bring the structure of both the London and New York cocoa markets back to some ‘normality.’”

A September 2002 article states that for months “traders in London have been speculating – literally and figuratively – about the motivation behind Armajaro Trading’s long, slow accumulation of cash cocoa, which began quietly two years ago with prices round (pounds sterling) 600 ($919) per ton, and continues today with prices over (pounds sterling)1,300 ($1,990)… The company itself refuses to comment, and traders say that years of low prices have left tree stocks old and possibly unable to bear beans.”
An article published in 2002 reports that Armajaro has acquired more than 148,000 tons of cocoa, an intake that is to be stored in a warehouse that equals the size of 480 squash courts. As Armajaro bought 7% of the world market in cocoa beans in 2002, Anthony Ward commented that Armajaro was helping cocoa producers by increasing the value of their product.
The FSA launched an inquiry into the dramatic rise in the price of cocoa upon learning that Armajaro has acquired – “stockpiled,” according to one article – 5 per cent of the world’s cocoa. The probe will be carried out by the FSA’s “new market abuse powers” and will be led by the FSA’s markets and exchange divisions. Reacting to these developments, Anthony Ward insists that he is not trying to corner the cocoa market and is not trying to instigate market inflation. Following the 2002 news of the FSA’s intentions, no follow-up reports surfaced.
John Tilney is quoted as a Glencore copper analyst in two articles from 1997.

http://www.armajaro.com/ è Company website

Mark Edward Thompson of Galena Asset Management, Ltd.

Mark Thompson joined the Trafigura Group in January of 2001. He is currently serving at the company’s Chief Investment Officer. He joined the company with Jeremy Weir. Both came over from N. M. Rothschild.

In 1997, Mark Thompson joined NM Rothschild, where he managed the bank’s global base metals option books. He was twice voted Risk magazine’s top market maker for copper options.

Mark Thompson began his career at Deutsche Bank in London.

In 2002 Trafigura Beheer BV was accused of trying to breach the United Nations oil embargo on Iraq. Apparently they were involved in the purchase of 230,000 barrels of crude oil from an Iraqi oil platform, through Ibex Energy France. Trafigura “claimed Ibex fooled it into believing that it had U.N. permission to purchase all of the oil.” No evidence of legal action being taken was found, although many of the articles indicated that cases may have been filed in the Netherlands.

The following link explains the connection between Trafigura, Galena, and Trafigura Baheer BV: http://www.trafigura.com/the_group.aspx.

Trafigura Beheer B.V., the parent company, is domiciled in Holland and its commercial trading and trading activities are managed by its main office in Lucerne, Switzerland and supported by a worldwide network of offices.

Galena Asset Management Ltd., based in London and FSA registered, is the subsidiary through which Trafigura has established and manages a fund management business.

Mark Schwarz of Newcastle Partners, LP

On Jan. 1, 2003, an article stated that in 1999, Dallas businessman Mark Schwarz, who owns Newcastle, purchased 2.2 percent of Tandycrafts. Warren Lichtenstein and Lichtenstein’s New York firm, Steel Partners II, purchased 12.8 percent. The total amount spent was more than $5.8 million. Both men sued Tandycrafts in 2000 over a proxy fight in which Schwarz and Lichtenstein attempted to oust the board. In a settlement, Steel Partners II and Newcastle Partners said they would end their efforts to remove Tandycrafts’ board members in exchange for three of six board seats.

In the Court of Chancery of the State of Delaware, there was a lawsuit where Steel Partners II, L.P. was the plaintiff and Tandycrafts, Inc. was the defendant. Newcastle’s role in this case was that it is another shareholder of Tandycraft besides Steelcraft. Steel Partners and Newcastle together owned approximately 14.9% of the outstanding shares of Tandycrafts. Steel Partners and Newcastle were involved in a proxy contest to take control of Tandycraft’s board of directors. On June 8, 2000, Steel Partners filed another amendment to its Schedule 13D disclosing that it and Newcastle had given advance notice, pursuant to Tandycrafts’ bylaws, of their nomination of five individuals for election to the Board at Tandycrafts’ next annual meeting. In other words, Steel Partners disclosed the possibility of a proxy contest to take control of Tandycrafts board of directors. Once Steel Partners announced its intention to nominate a competing slate of directors, and the date for the decisive annual meeting approached, Tandycrafts changed course. On August 22, 2000, Tandycrafts commenced an action in the United States District Court for the Northern District of Texas against Steel Partners, Newcastle, and their respective principals, Warren Lichtenstein and Mark E. Schwarz.

This describes Mr. Schwarz’s reasons for his lawsuits involving proxy fights from an article dated Jan. 27, 2002: “The negative connotation that is conjured by ‘corporate raider’ is that of pillage and plunder,” said Mark Schwarz, general partner of Newcastle Partners in Dallas and a veteran of many proxy fights. But he said many other dissidents are motivated by a desire for better corporate governance. “I’m not a corporate raider — I’m a shareholder activist,” Schwarz said. “It’s an issue of accountability, an issue of shareholders’ interest in being represented in the board room.”

On Dec. 22, 2003, there was an article about a conflict between Pizza Inn’s (a pizza chain) largest shareholder, Newcastle Partners, and Pizza Inn. Newcastle believed the lack of initiative and strategic planning displayed by Pizza Inn’s current board threatened the company’s future in the highly competitive pizza segment. As the company’s major shareholder, it wanted to increase the chain’s board positions from seven to nine and acquire four of them. For its part, Pizza Inn claimed Newcastle’s efforts to gain more board spots and change certain company bylaws constituted a “change of employment” based on the contracts of its executive officers. Such changes, it claims, would trigger parachute payouts in the millions, which the highly leveraged chain cannot afford. Multiple Securities Exchange Commission (SEC) filings were made.
On February 11, 2004, the above article’s conflict was resolved. Resolutions to repeal certain amendments to the Pizza Inn’s bylaws, as discussed in the Company’s proxy statement, and the resolution recommending to the Board of Directors to reimburse expenses incurred by Newcastle Partners, L.P., in connection with its solicitation of proxies, were approved. Ronnie Parker, President and CEO, said: “Both Mark Schwarz and I, as well as the entire Pizza Inn family, are happy these matters are resolved.”
On Dec. 14, 2004, an article stated that embattled Pizza Inn CEO Ronald Parker was officially fired on Dec. 11 by the 410-unit chain’s board of directors. As detailed in numerous filings with the Securities and Exchange Commission, Pizza Inn CEO Ronald Parker ’s leadership in changing his employment contract – plus the contracts of three other executives – to include hefty severance packages, had long been a bone of contention between him and Newcastle Partners.

Iain Paterson of Trafigura Asset Management, Ltd.

One record for Trafigura Asset showed it among the directorships of Lord Strathclyde.

A record from the US Court of Appeals was found for Trafigura Beheer. They were the defendants in a 1997 case filed by Daye Nonferrous Metals Company.

In 2002 Trafigura Beheer BV was accused of trying to breach the United Nations oil embargo on Iraq. Apparently they were involved in the purchase of 230,000 barrels of crude oil from an Iraqi oil platform, through Ibex Energy France. Trafigura “claimed Ibex fooled it into believing that it had U.N. permission to purchase all of the oil.” No evidence of legal action being taken was found, although many of the articles indicated that may be a possibility in the Netherlands.

More detailed information into the case Trafigura filed against Golden Stavraetos was found.

Seth Morris of BAM Capital, LLC

Hal David Mintz of BAM Capital, LLC

Sept. 15, 2005–New York investment banker Hal Mintz and Hollywood screenwriter Rich Leder join forces to create Woodcliff Films and initiate fundraising for their first independent feature (different Hal Mintz)

A different Hal Mintz is a disbarred lawyer and gambler.

A different Hal Mintz, a college professor and massage parlor owner owes in unpaid taxes stemming from his no contest plea to two counts of state income tax evasion.

A media article shows an affiliation to TheStreet.com. The article also provides a brief bio on Mr. Mintz, including prior employments, and education. Contact info is also available.

Mr. Mintz was a guest on a bull vs. bear discussion by Kudlow and Cramer to take an in-depth look in to technology stocks and the impact a war with Iraq could have on the U.S. economy and market.

A September 2002 article lists Mr. Mintz as having participated in a CNBC airing with Mary Farrell of UBS PaineWebber, where they discussed technology stocks, as well as the impact that the war in Iraq could have on the US economy and market.

A June 2004 article mentions that Hal Mintz “heard chatter” in reference to SouthTrust executives having possibly cancelled an analyst meeting, which in turn triggered speculation about a possible deal. Mr. Mintz speculated about a possible deal with SouthTrust because executives cancelled an analyst meeting. He tried to buy SouthTrust calls but apparently wasn’t aggressive enough.

A media article contains a compilation of items on Mr. Mintz, including an article from TheStreet.com, among others.

A December 2003 article quotes Mr. Mintz when he states that, “exchanges do not honor broker/dealer quotes the same way they honor customer quotes.”

Nathan Fischel Ghodsian of DAFNA Capital Management, LLC

The website for Cedar Sinai Medical Center lists Nathan Fischel-Ghodsian, MD as Director of Molecular Hematology at Cedars-Sinai Medical Center and Professor of Pediatrics at the David Geffen School of Medicine at the University of California, Los Angeles (UCLA).

According to his bio on DAFNA’s website (http://www.dafnacapital.com/ourteam/cvs/nathan.html), Mr. Fischel has been married to Dr. Fariba Ghodsian since 1983, and they have three children. This bio also states that he was raised in Germany and attended boarding school in France.

A 2009 article confirms that Nathan Fischel and his wife Fariba Ghodsian are board members of the American Technion Society.

Conference call transcripts from July 2008 and August 2006 list Nathan Fischel as an analyst with DAFNA Capital Management.

Nathan Fischel-Ghodsian, M.D. is listed as a participating investigator of the Mammalian Mitochondrial Ribosomal Consortium.

A March 2003 article wherein Nathan Fischel provides analyses lists him as an oncologist and managing partner at Castle Creek Life Science Partners.

Nathan Fischel-Ghodsian, listed as Professor Of Pediatrics at Cedars-Sinai Medical Center in Los Angeles, wrote a research article titled “Molecular Basis Of Maternally Transmitted Deafness”.
A December 2001 article about Fariba Ghodsian’s work and experience quotes Nathan Fischel, Ms. Ghodsian’s husband. “She puts the news of the industry into perspective in no small part because of her background, he says. ‘You have to separate the hype from the real thing and her experience allows her to do that. Too often investment decisions are emotional-based and not data-based but she gives you the data and then you can decide.’ The overall data and understanding she brings to the table definitely add value, he says. ‘She’s as good as, and sometimes better than, the analysts at the bigger investment banks,’ he says.”

Christopher Neil Brodie of Krom River Partners, LLP

Krom River, a London-based commodities trader, is mentioned in many articles. No detrimental references were found pertaining to Krom River Partners.

Many media references were found from 2006 and 2007 that identify Christopher Brodie as a partner at Krom River Partners. Many articles quote Mr. Brodie on issues ranging from wheat prices to biofuel.

In October 2004, Armajaro Asset Management LLP launched the Armajaro Commodity Fund, located in the Caymans. John Tilney is the fund’s investment manager, while Chris Brodie is the senior portfolio manager. Armajaro also runs Coolum Fund. Armajaro Asset Management is linked to Armajaro Holdings, a multinational trading company.